• 3 minutes UAE says four vessels subjected to 'sabotage' near Fujairah port
  • 6 minutes Why is Strait of Hormuz the World's Most Important Oil Artery
  • 8 minutes OPEC is no longer an Apex Predator
  • 12 minutes Mueller Report Brings Into Focus Obama's Attempted Coup Against Trump
  • 16 hours Did Saudi Arabia pull a "Jussie Smollett" and fake an attack on themselves to justify indiscriminate bombing on Yemen city population ?
  • 3 hours Canada's Uncivil Oil War : 78% of Voters Cite *Energy* as the Top Issue
  • 11 hours China Downplays Chances For Trade Talks While U.S. Plays ‘Little Tricks’
  • 16 hours Solar Industry Lays Claim To The 2020s; Kicks Off The Solar+ Decade
  • 16 hours "We cannot be relying on fossil fuels to burn as an energy source at all in our country" - Canadian NDP Political Leader
  • 6 hours California Threatens Ban on ICE Cars
  • 14 hours Shell ‘to have commercial wind farms’ by early 2020s
  • 1 day DUG Rockies: Plenty Of Promise, Despite The Politics
  • 1 day Dear journalists: say "climate crisis" not "climate change"
  • 6 days How can Trump 'own' a trade war?
  • 24 hours Iran v USA the perfect fire triangle
  • 21 hours U.S. and Turkey
  • 1 day Oil Price Editorial: Beware Of Saudi Oil Tanker Sabotage Stories
Alt Text

The 2 Energy Giants Reshaping The Middle East

Typical crude oil producers such…

Alt Text

Oil Shrugs Off Trade War Threat

Oil markets saw a volatile…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Trending Discussions

Oil Price, Sanctions Weigh On Russian Stocks, Moscow Unfazed

When Donald Trump won the presidential vote last year there was an outcry from his opponents due to his alleged close ties with the Russian government. Many believed that Trump would be quick to remove U.S. economic sanctions against Russia, thus stimulating economic growth in the country and making it more daring territorially.

This has not happened and is unlikely to happen, as is becoming increasingly obvious. The sanctions have remained, and so have low oil prices, pressuring Russia’s growth and stock market. These two factors are seen by some analysts as the drivers behind equity price trends in the country.

According to CNBC, the Moscow Composite Index, or Micex, is down 8 percent in the past three months, underperforming the U.S. stock market by 15 percent, thanks to Trump’s vow to keep sanctions in place and, of course, the new lower normal for oil prices.

Now, investors are naturally wary of tapping a market that is the object of economic sanctions, even though the last two months of 2016 saw a 15 percent jump in Micex, driven by expectations of a warming in bilateral relations. This decline in equity prices we are witnessing now was to be expected once it became clear that this warming – if it takes place at all – will not be a quick deal.

In terms of relative weight, however, oil prices may have more to do with stock market developments in the world’s largest oil exporter. Despite much praise for OPEC’s deal, which saw the cartel and 11 other producers pledge to remove some 1.8 million barrels of crude from the global market, it has so far failed to bring prices much higher.

This is concerning for Saudi Arabia and other Gulf producers, as it surfaced recently, but it does not seem to be bothering the Kremlin. At the start of this year, Deputy Finance Minister Anton Siluanov said that the country could return to positive GPD growth in three years if Brent remains at US$50 a barrel. Each additional US$10 per barrel translates into over US$28 billion in state revenue.

So what about the stock market? Micex is down by 8 percent in the year to date, but that’s a bit more than three months. The one-year change in the index, however, as of March 6, is a gain of 9.89 percent, which is not too shabby considering that 2016 marked the bottom of the oil price rout, plus the full set of sanctions. Related: Saudis Cut Light Crude Prices To Asia To Keep Market Share

Analysts believe that the downward trend in the Micex will continue through the rest of the year. This is, again, only to be expected – quick spikes in equity markets driven by a single event and its potential implications are often short-lived, just like the jumps in oil prices that followed every statement from an OPEC or Russian oil official in the months leading up to the November 30 production cut deal.

Chances are, however, that the drop will slow down, unless the new administration changes its stance on Russia to an openly hostile one. Let’s not forget, after all, that the U.S. sanctions against Russia are not of the blanket type: they target specific individuals and legal entities close to President Vladimir Putin. This curbs the adverse effects in the context of equity market trends, so some investors can still do business in Russia.

Oil prices are likely to remain around the US$55 a barrel mark for Brent and a little lower for WTI. Sanctions are also likely to remain in place. This means that Russian stocks are likely to continue their slide, but the slide will probably slow as the Trump hype fades and Russian stock markets return to business as usual.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News